Venture Capital Fund
A venture capital fund is a pooled investment vehicle that invests in early-stage, high-growth private companies.
Allocator relevance: High dispersion asset class—manager selection, access, reserves strategy, and term discipline drive net outcomes.
Expanded Definition
VC funds typically invest across stages (seed to growth) depending on mandate. Returns are power-law distributed, meaning a small number of winners can drive the majority of outcomes. This makes sourcing edge, underwriting discipline, and follow-on reserves strategy critical. VC also has long duration and limited liquidity, so pacing and liquidity planning matter at the allocator portfolio level.
How It Works in Practice
Funds raise commitments, deploy into startups, support follow-ons, and return capital through exits (M&A, IPO) over many years. Performance is tracked via TVPI/DPI/IRR, but early metrics can be mark-driven.
Decision Authority and Governance
Governance includes mandate clarity, reserves policy, and valuation discipline. LPs diligence track record attribution and team stability heavily.
Common Misconceptions
- VC is mostly about picking companies (access and ownership matter).
- High TVPI early guarantees outcomes.
- VC exposure is interchangeable across managers.
Key Takeaways
- VC outcomes depend on access, ownership, and reserves.
- Long duration requires pacing discipline.
- Net economics and valuation policy affect reported performance.